Government in talks over state takeover of Flybe?

Collapsed airline Flybe’s administrator EY has denied reports that it is in negotiations with the government to buy the regional carrier out of bankruptcy in order to protect the UK’s battered aviation sector.

Edward Thicknesse

According to the Telegraph, the Big Four auditor has opened talks with government officials about nationalising the airline in order to serve the UK’s loss-making regional routes.

However, EY said that no such talks were taking place. A spokesperson said: “At this time, we can confirm that there are no discussions between the joint administrators and government about taking Flybe out of insolvency”.

It added that it “continues to be open to approaches from all parties in order to realise returns for creditors”.

Flybe collapsed at the beginning of March after failing to secure a state loan which would have enabled it to keep flying.

Virgin Atlantic, which part owned the airline in a consortium with Stobart Aviation and Cyrus Capital, refused to put any more money into the airline due to the damage coronavirus has done to its business.

The subsequent fallout from the coronavirus outbreak, which has crippled global aviation, has led to a number of airlines calling for state aid to protect them against the threat of collapse. 

A group representing 2,500 or so Flybe employees forced out of work by the collapse of Europe’s biggest regional airline wrote to the chancellor last week asking him to take action so they could access the government’s furloughed workers’ wage scheme.

The talks come as business secretary Alok Sharma announced that insolvency rules would be relaxed for the duration of the crisis in order to keep as many companies trading as possible.

The legislation, which will be backdated to the beginning of March – Flybe collapsed on 5 March – will allow companies “emerge intact the other side of the Covid-19 pandemic”.

The UK’s airlines have been among the worst hit by the crisis, but were dealt a considerable blow last week when chancellor Rishi Sunak announced that they would only be able to access state aid as a “last resort”.

In a meeting with the transport select committee, transport secretary Grant Shapps said that negotiations were ongoing with individual airlines on a case-by-case basis, refusing to rule out the government taking a stake in certain carriers. 

Flybe part-owner Virgin Atlantic is reportedly in talks with officials over a package of commercial loans and guarantees worth hundreds of millions of pounds.